Sam Bankman-Fried has resigned as CEO of crypto exchange FTX.
Lam Yik/Bloomberg via Getty Images
The Bahamas police said it’s investigating potential “criminal misconduct” at FTX.
FTX filed for Chapter 11 bankruptcy on Friday and its founder Sam Bankman-Fried has resigned as CEO.
FTX has been embroiled in a dramatic liquidity crisis since last week.
The Bahamas police is investigating Sam Bankman-Fried’s beleaguered and now bankrupt crypto exchange FTX for “criminal misconduct,” the law enforcement authority said in a Sunday statement.
The Bahamian police added that its financial crime investigation branch is “working closely” with the Bahamas securities regulator in the investigation.
—Royal Bahamas Police Force (@RBPFPolice) November 13, 2022
Last Thursday, the Securities Commission of the Bahamas’ froze the assets of an FTX subsidiary, compounding its financial woes. The securities regulator said at the time it was aware of statements suggesting FTX mishandled, mismanaged, or transferred the assets of clients to Alameda Research, Bankman-Fried’s crypto trading firm.
The securities regulator did not specify its concerns but sources told Reuters Bankman-Fried had transferred $4 billion from FTX to Alameda earlier in 2022 without telling anyone, the news agency reported last Thursday.
The US Securities and Exchange Commission and the Department of Justice have also opened investigations into the collapse of FTX. Bankman-Fried was also reportedly interviewed by the Bahamian police on Saturday.
FTX’s progressively worse week ended in a petition for bankruptcy
It’s been a dramatic and progressively worse week for Bankman-Fried. It started with a very public feud with Binance CEO Changpeng “CZ” Zhao the weekend of November 5, and ended with FTX filing for Chapter 11 bankruptcy on Friday and Bankman-Fried resigning as CEO, after a crippling liquidity crisis brought down the exchange which was once valued at $32 billion.
Two weekends ago, Zhao tweeted that Binance would be liquidating all its FTT tokens — a crypto token native to FTX — due to “recent revelations.” Zhao didn’t specify his concerns at the time, but a November 2 CoinDesk report had been stoking market fears about FTX’s liquidity position.
Bankman-Fried then hit back at Zhao on November 7, tweeting: “a competitor is trying to go after us with false rumors,” per media reports including Bloomberg and Reuters.
The drama weighed on market sentiment, sparking a rush for withdrawals. Around $6 billion was withdrawn from FTX in the 72 hours preceding prior to November 8, Reuters reported, citing a message Bankman-Fried sent to staff.
As the drama unfurled in public, Bankman-Fried and Zhao shocked the world by announcing on Tuesday that Binance was to acquire FTX. Zhao sent shockwaves again, when he soon thereafter pulled out of the deal, citing issues “beyond our control or ability to help.”
FTX eventually filed for bankruptcy on Friday, two days after Bankman-Fried warned investors that the firm faces bankruptcy if it did not receive emergency funding to plug a shortfall of up to $8 billion, Bloomberg reported.
The exchange’s troubles continued on Saturday, when John Ray, the chief restructuring officer and CEO of FTX said they were reviewing an “unauthorized access to certain assets,” after the Financial Times reported funds worth hundreds of millions of dollars had been withdrawn in a potential hack, citing analysts.
Ray’s statement was retweeted by FTX’s official Twitter account.
Blockchain analytics firm Elliptic said it suspected $477 million in crypto assets have been stolen from FTX in the 24 hours since the exchange filed for bankruptcy.
FTX did not immediately respond to a request from Insider for comment about the police investigation.
The turmoil at FTX has weighed on the crypto market with Bitcoin down 23% in the last seven days, while ethereum is down about 25% in the same period, according to CoinMarketCap.